Save Money on Your Car Insurance
Is it possible to reduce your car insurance bill? Just a few tweaks could save you hundreds each year.
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The cost of car insurance seems to be ever increasing and depends on so many factors, like what state you live in, your driving record, the value of your car, if you commute daily or use it just for personal errands.
As you begin to approach retirement, it might be a good time to look at your policy closely again to see if there are ways you can save money. Even a few minor changes could save you hundreds of dollars each year.
How to Find Savings
Increase your deductible
Take a mature driver course
Lean into bundling and loyalty
Pay your policy in full
Try to keep your driving record clean
Compare rates before each renewal
Work on your credit score
Examine how you drive
Look at new car insurance costs
Review your current policy
Increase your deductible
The easiest way to quickly decease your car insurance premium is to pay a higher deductible. This is the amount of money you would have to pay before your insurance begins to chip in after an accident.
Did you know the most common deductible that people select is $500? It makes sense as you need to be prepared to quickly pay the $500 yourself. With today’s high cost of living it is a struggle to keep money in savings accounts, and this seems to be an amount that folks are comfortable committing to.
If you went through FAWA’s Save $1000 in a Month exercise, you may have been able to boost your emergency fund. If this is the case, consider bumping up your deductible to $1000 (the second most popular deductible choice). This will surely save you money right there.
Take a mature driver course
Depending on your state regulations, drivers 55 and older may be able to lower auto insurance premiums by up to 15% for three years by completing a state-approved defensive driver course. The providers vary from state to state and offer fully online, state-approved classes starting around $12-15. AARP offers a course online that is said to work in all 50 states.
The online courses are self-paced and offer a certificate of completion that you can send to your insurance carrier to get a discount. You will get a three year reduction in rates provided you are not involved in a citation-cited crash or convicted of moving violation.
Lean into bundling and loyalty
If you combine your auto insurance with a homeowners, renter, or life insurance policy, some companies will offer you ‘bundling’ discounts for holding multiple policies with them. If you insure more than one car under the same policy, you will get a multi-car discount.
Loyalty is factor for insurance companies as well. If you set up your bank account for electronic billing and automatic deductions, you are giving them the impression you are committed to keeping your policy with them for the duration of the policy. It reduces their overhead administration costs when you do this and they may pass on some savings to you. (Note: You don’t have to stay with an insurance provider for any specific period of time. You can change mid-policy if you want to.) You may also receive additional discounts if you renew your policy before the current one lapses with the same insurance company for many years.
Pay your policy in full
If you have the money in your account, pay your 6- or 12-month policy upfront rather than in monthly installments. The insurance company doesn’t have to mail monthly premium bills to you. Again, they save on admin overhead and will reduce your policy accordingly.
Try to keep your driving record clean
Car insurance rates typically remain elevated for 3 to 5 years after an at-fault accident. Once this period passes and the crash falls off your insurance record, the surcharge is removed and your premiums generally return to normal baseline rates. Not-at-fault accidents often stop affecting rates much sooner, sometimes at the very next policy renewal or immediately upon shopping for a new policy.
Minor claims below certain thresholds (often $500 to $1,000) may not increase your rates at all if your provider offers accident forgiveness. Conversely, major violations or severe crashes can keep premiums higher for longer.
Compare rates with more than one company before every renewal
Only 36% of consumers say they look for car insurance quotes once a year. That’s leaving money on the table. Really. There are a number of reasons why you want to do this. As covered in the point above, rates may decrease if a 3-5 period of time has elapsed in which you have not been been in an at-fault accident or received a ticket. Different insurance companies use different metrics so it is worth your time to shop around.
Other factors include the age and condition of your vehicle, and your current credit rating.
Keep in mind that the cheapest insurance isn't always the best. Focus on the coverage you need and make sure you're getting quotes that reflect that. If you think a cheap car insurance quote is too good to be true, it likely is.
A higher credit rating means lower car insurance rates for you
This may be a surprise for a lot of folks, but auto insurers frequently factor in a policyholder’s credit score when calculating car insurance premiums. Yes, it’s true. In some states, they are allowed to do a credit check as part their risk assessment on you.
The thought is finding out how responsible you are in your day-to-day life. If you are having financial difficulties, you may be making less responsible decisions when driving. I guess it is additional motivation to keep on top of your bill due dates and get your credit score up.
To improve your credit score, make sure to pay your bills on time every month, pay down your debt balance, and pull a free copy of your credit report every year to make sure everything on there is accurate.
As you near retirement check out your driving habits
It’s not just what you drive but also how you drive that matters to insurance providers. If you keep your driving record clean for 3 to 5 years, your risk classification will decrease. Some insurance providers may offer a discount with a telematics program; they will ask you to keep a plug-in monitor in your car or use an app on your phone that tracks and reports potentially risky driving behaviors (quick braking, speeding, driving late at night). I personally have not opted for this as I think it is a little too Big Brother for my taste, but the option is there.
If you drive your vehicle less than average (7500 miles or less) on an annual basis, you may qualify for reduced rates as well. And as already mentioned, an approved defensive driving course or accident prevention course for seniors can earn you up to a 15% discount for up to three years. Check your individual state to see what courses are available.
Other discounts that lower your premiums
There are many other discounts that you can take advantage of to reduce your car insurance rates. If you buy your policy online, you will get a discount doing so. If you agree to go ‘paperless’ when signing up for a policy you can save money. You will be able to see your policy online at amy time and can print it out if you want a hard copy in your files.
You may also be able to get reduced rates through your school, professional association, or AARP membership. If you are an active or retired military member you can get a discount as well. (Thank you for your service!) If you have an energy efficient car, or advance safety and anti-theft features you can also catch a break. Where you park also matters. If your zip code has a higher crime rate, parking in a garage can reduce your insurance costs.
When shopping for a new vehicle check out insurance costs
If you are nearing retirement and want to keep your fixed costs to a minimum, it will worth your time to look into average insurance costs for various makes and models of vehicles before you buy. A fast sports car or a big truck may be part of your retirement dream, but the associated insurance holding costs could be a budget buster.
As a general rule, the higher the repair costs, the more expensive the insurance premium. All of the extras on your vehicle can add up quickly: custom paint, audio and light systems, extra technology packages.
Which cars tend to have the lowest average insurance rates? Subaru Outback, Crosstrek, and Forester. Honda CR-V LX. Jeep Wrangler Sport.
Check out your current policy thoroughly
If you are part of the 64% that hasn’t received a car insurance quote in a while, it might be time to take a closer look to see if your coverage needs have changed.
How old is your vehicle? You may be able to lower your limits on comprehensive and collision, or do without them altogether and just stick with liability. (See FAQ below for more information.)
Is your car paid off or do you own a minimal amount on your existing loan? If so, you may no longer need gap insurance. If you lease or have your car fiananced, you may still be required to keep a certain level of comprehensive and collision coverage. If you own your car outright now, you have more flexibility and can lower or opt out of coverages.
Choosing your uninsured motorist coverage and your stacked/unstacked options will also save you money, but may offer you less protection. Choose carefully. (More info on this in FAQ below.)
FAQ
Q: As my car gets older, my car insurance should be cheaper, right?
A: Not necessarily. As your aging vehicle's value drops, it does not automatically guarantee lower premiums. The majority of your insurance premium pays for liability coverage (damage to others), which is tied to driver risk, not vehicle value. It is not just what you drive, but how you drive that is factored in.
Older cars many require older or discontinued parts to repair damage in an accident. These parts may be harder, and more expensive to find which drives up repair costs. Older cars may not have the newer tech crash avoidance technology or anti-theft devices that help earn policy discounts. Also, medical costs continue to increase. Any legal claims against you for injury or hospital stays will continue to increase no matter what age your car is.
Q: When should I drop my comprehensive and collision coverage for my old car?
A: These optional add-ons pay to repair your car. As the vehicle's actual cash value goes down, the payout you would receive from the insurer shrinks. If your older car's value is very low, it may no longer make financial sense to pay for these coverages
You should drop comprehensive and collision coverage if your car's value is less than 10 times the annual premium, its actual cash value falls below $4,000 to $5,000, and your vehicle is completely paid off. Before canceling, verify your car's Kelley Blue Book value and ensure you have enough savings to comfortably replace the vehicle yourself if it is totaled.
It is important to do the deductible math. If your vehicle's actual cash value is very low, subtract your deductible (ie $500 or $1,000) from your car's Kelley Blue Book value to find your maximum payout. This is more or less the amount that your insurance company would payout to you. If the payout is minimal, the ongoing premiums are rarely worth it.
Q: I don’t understand stacked vs. unstacked insurance and underinsured insurance.
These terms refer to Uninsured Motorist (UM) and Underinsured Motorist (UIM) coverage.
Uninsured Motorist: Pays your medical bills when an at-fault driver has zero insurance.
Underinsured Motorist: Pays the gap when an at-fault driver does have insurance, but their limits are too low to cover all your medical bills.
Stacked vs. Unstacked: Refers to whether you can combine the limits of your UM/UIM policies for multiple cars. Stacking combines them for a higher payout limit; unstacked keeps the limits separate per vehicle.
If you are hit by a hit-and-run driver or a driver who has no auto insurance at all, your insurance company steps in to act as the at-fault driver's insurance. It pays for your medical bills, lost wages, and pain and suffering.
If a driver hits you and causes $150,000 worth of injuries, but their insurance policy only covers up to $50,000, you are left with a massive gap. Underinsured Motorist coverage kicks in to pay that remaining $100,000 (up to your UIM policy limit).
Stacked Coverage (UM/UIM) is when you have multiple cars in your household, stacking allows you to "add together" the coverage limits of each car.
Example: If you own two cars and each has $50,000 in UM coverage, stacking them gives you a total of $100,000 in available coverage for an accident. This usually results in a slightly higher monthly premium but provides a larger safety net. It can also extend to protect you as a pedestrian or if you are riding in someone else's car.
Unstacked Coverage (UM/UIM)
With unstacked coverage, your protection is tied strictly to the specific vehicle involved in the accident.
Example: If you have two cars, each with $50,000 in unstacked UM coverage, your maximum payout in an accident is capped at $50,000 regardless of how many vehicles you own. This option comes with a lower monthly premium but offers less protection in a severe accident.
